Flash loans are loans that can be taken by anyone, without ever having to put down any collateral. These transactions are made possible due to the nature of flash loans: everything is repaid in the same block.
The entire process is executed by a smart contract. If the smart contract detects that the loan will not be fully repaid in the same block, the transaction will be rejected.
Platforms that allow the usage of flash loans usually charge a fee - for Bentobox, it is 0.05%.
Flash loans are particularly useful for arbitrage and liquidations. It is extremely capital efficient, as bots and users do not need to have high amount of idle funds in their wallets to execute the trade.
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